Mini-refrigerators on Bay State Ave.

Credit: Kirk Carapezza / WGBH

Students Return Amid Rocky Time For Higher Ed Industry

September 3, 2013

No other city transforms like Boston this time of year, and the scenes are all around us: Returning college students driving U-Hauls, moving into dorms and re-connecting after a summer back home What’s different this September is the nationwide focus on higher education, from the cost, the debt to the payoff.

On Baystate Road in Kenmore Square, trucks packed with mini fridges and microwaves line the streets in the shadow of the Citgo sign.

Boston University Sophomore Taylor Lovett dreads move-in day, but she’s excited to get started and to see her friends. BU, which charges about $30,000 per semester and which has no problem filling its seats, was Lovett’s top choice.

“I toured a bunch of schools and when I came here I just knew that I wanted to go here," Lovett said. "It was really the only place that I liked.”

While students here in Boston set up their dorms, colleges and universities elsewhere are struggling at times behind the scenes and at others, in full view. Take, for instance, empty seats.

Not every school is like BU. At last count, more than 300 colleges and universities had vacant seats to start this school year, according to the National Association for College Admissions. The number of high school graduates is declining. At the same time, competition from new online alternatives is increasing, and students are increasingly price-conscious. Harvard charges $56,000; Hampshire College in Amherst, $58,000.

Hampshire College

Caption

Photo Credit: Kirk Carapezza / WGBH

"I think colleges are doing the best that they can,” said Julie Richardson, dean of admissions at Hampshire, a small liberal arts college that has plans to downsize its enrollment next year from 1,500 to 1,400 students.

"As the price keeps going up, within 10 years our price tag will be over $75,000," she said. "That’s a number that begins to concern a lot of people.”

The number is concerning long before it hits $75,000. That’s because students leaving school are footing a bill of debt huge debt. Debts never before seen in this country for young people with fewer and fewer options to find jobs and start paying down their student loans.

John Marcus, higher-education editor of the Hechinger Report, says the drop in enrollment is an indication of underlying problems for many colleges.

"When you think of colleges and universities around here, you think of pretty campuses, or you went to one of these schools or you aspire for your kids to go, but they’re businesses and people that analyze businesses like Bain and Moody’s are looking at them and at their financial viability and saying, ‘No, they’re not financially viable and many of them will close,'" Marcus said.

College Enrollment Stats:

Closing colleges? How realistic is that? Sure, Moody’s recently issued a report that said more than 40 percent of schools are seeing their enrollments drop off. Capital spending at both public and private institutions is down, so campus buildings aren’t getting fixed, and more and more colleges rely on adjunct faculty.

But do colleges just go out of business? Doesn’t the whole idea of escalating tuition mean that the higher education industry is booming?

It’s one thing to say Harvard charges $56,000 and Hampshire charges $58,000. But more and more schools are giving away money a lot of it in grants and financial aid, and it’s not just $3,000 here and $6,000 there.

The average college is shaving 45 percent off their costs. That’s up from 37 percent in 2000, according to the National Association of College and University Business Officers.

For colleges, that trend is unsustainable, Marcus said.

“Every school wants to be full and many of them aren’t filling,” he said. “Even though, from the outside, it looks as if they’re increasing their tuition at more than the rate of inflation, they’re actually falling behind because, in the end, more and more of their income is going back out in the form of financial aid or discounts.”

Like the airline industry, higher education is slashing the sticker price to fill empty seats before the school year takes off.

So if this business model isn’t sustainable, especially for small liberal arts schools, is the industry finding a solution?Not anytime soon if you ask Robert Zemsky, chair of the Learning Alliance for Higher Education at the University of Pennsylvania.

“We don’t know how to reengineer the cost function,” he said.

Zemsky studies the economics of higher ed, and he recently wrote a book called “Checklist for Change.”

Zemsky says the trend of college expenses outpacing revenues is unsustainable. But he says it’s actually good news that enrollment is down or flat.

“The economy has picked up because there is a reciprocal relationship between post-secondary enrollments and the economy," he said.

Ok, let’s put this in layman’s terms:

“When people can’t find jobs they go back to school to get more skills, and when the jobs become available they leave school,” Zemsky said.

While the vast majority of students don’t attend small, private colleges, Zemsky says those schools tend to be bellwethers for the rest of the higher-ed industry.

So what is preventing higher education from making changes that would bring real reform?

Despite the public outcry over student debt and high tuition, Zemsky says many institutions are not convinced that change is even necessary.

“We need that larger conversation or it’s going to be very piecemeal and it’s going to be very unpleasant," he said "Because absent that, we’re in for some really unpleasant times in higher education.”

And in states like Massachusetts, where higher education is one of the top industries, there could be serious economic implications for those living and working on and off campus.

This story was produced in collaboration with the education news organization, the Hechinger Report.

Our On Campus reports are a collaboration with The Forum for the Future of Higher Education and made possible with support from the Lumina Foundation for Education.